What creators can expect from advertising in 2023
Wouldn’t it be nice to have a crystal ball to understand what will happen with advertiser spending and CPMs in 2023?
If you’ve been a creator for long, you know uncertainty is the only certainty in online advertising.
While there’s no crystal ball, we dug into a lot of data, discussed trends with financial advisors, gathered feedback from advertisers, and analyzed how various advertisers behave in different economic conditions to put together a forecast for 2023.
Let’s set the stage: Year-over-year ad spend
The best way to start a forecast is to look backward. It’s always best to look at ad market trends from a year-over-year perspective: comparing one year to the year before.
- Q1 2022 was strong: The first few months of 2022 saw very strong ad spending, continuing a “COVID bubble” that began in late 2020.
- Q2 2022 was okay: The second quarter of 2022 (April-June) was still doing alright, but the market was significantly weaker by the end of June.
- Q3 2022 was a false bottom: When the third quarter was even worse than Q2, it led to some early hope things were finally bottoming out and might recover for a strong Q4.
- Q4 2022 was disappointing: October seemed stronger (giving more hope!), but November and December dashed those hopes, and the usual huge spikes in ad spend were significantly muted compared to years past.
Looking into 2023
Because of last year’s trend, it’s almost a given that the first 4-5 months of 2023 will look worse year-over-year since advertiser spending was so strong from January–May of 2022. That being said, CPMs are relatively strong so far this January, especially compared to where they were in December.
Since 2022 worsened in June and beyond, we expect 2023 to trend more positively year-over-year in the second half.
Let’s set the stage: The economy
To fully understand advertiser spending, we must look at the larger economic environment.
The beginning of 2023
Inflation has been steadily dropping in recent months but is well above past norms. It’s impacting consumer spending, which directly influences advertiser spending.
Supply chain issues are improving, but some categories of products continue to see shortages. For example, it’s still hard to find children’s pain relievers. If brands don’t have products in stock, there’s no reason for them to advertise those products.
Many companies are laying off significant parts of their teams. Tech companies, in particular, are at a major inflection point, signalling their concern that things with the economy may get worse before they get better.
Many major global economies are still at risk of falling into recession. Marketing budgets are among the first things to get cut during a recession. They’re also the first to rebound after a recession, but when companies feel they need to tighten their belts, they’ll do it in marketing first.
Moving forward: Uncertainty is the new normal
These larger trends in the economy continue to point to significant uncertainty. And if there’s one thing advertisers hate, it’s uncertainty. They want to feel comfortable that their ads will drive purchases or other behavior that makes their companies more money, and they’ll hang back if they’re not sure consumers are ready to buy.
In 2023, some advertisers will continue to spend (for example, travel advertisers are spending nearly twice as much this January compared to last January), but many major categories of advertisers will spend less.
Here are three trends we’re seeing early in 2023 and what this may mean for advertiser spending this year.
Trend 1: Small business is big
Aside from travel advertisers, there are some other bright spots. A big one is small businesses: we’re seeing over 50% more ad spending from small advertisers than in January 2022.
Part of this is because the ad market is less competitive, making it easier for them to win in the programmatic ad auction, and part may be the early growth of new startups.
Every period of economic weakness leads to the growth of new small companies that become the next-generation leaders. It’s hard to see the news of massive tech companies laying off tens of thousands of employees, but those talented individuals will likely spin off thousands of new startups hungry to make their mark.
Trend 2: The rise of retail media
Another key category trend is the growth of retail media networks. You’re likely seeing more and more “Advertisement” flags on e-commerce sites you frequent. That’s because a great place for advertisers to spend money is where customers are already making purchasing decisions.
This trend may be harmful to traditional content creators since it redirects ad spend to retailers instead of content-driven sites. But those retail sites don’t have unlimited spaces to run ads, and often partner with publishers to run ads to reach those same users as well.
So that’s where we come in: we’re partnering with the largest retailers in this capacity, and we’re heavily focusing on growing those partnerships to help direct this type of ad spend to our creators.
With this trend, we’re seeing a decline in spending from food and consumer-packaged goods companies but seeing a lot of growth from retailer spending to counterbalance that decline.
Trend 3: Connected TV (CTV) means high-quality video formats are paramount
Connected TV (CTV) advertising growth is the final major trend affecting ad markets. Since most people now watch TV through smart TVs and devices like Roku and Apple TV, advertisers aren’t just migrating their budgets from “linear” television to CTV — they’re also moving money from other platforms like the web.
Buyers want their ads to appear in the best-quality environments, and 30-second ads on TV are an irresistible place to spend money because they’re high-quality and effective.
This trend is one of the key reasons we focus on high-quality video formats like our redesigned sticky video player. We know these better video experiences will be where ad buyers want to spend their money over time.
2023 at a glance
There’s a ton going on in the ad industry:
- We think the first 4-5 months of 2023 will be weaker than 2022, although RPMs are generally looking strong for January so far
- By the summer, we expect ad spending to be somewhat closer to what it was last year
- By the end of the year, we think there will be some moderate growth in ad spend
- Caveat: There are major ad industry changes going on that could affect all of these forecasts, like fresh trends in CTV, retail media, privacy regulations, and third-party cookies
- Caveat: There continues to be significant economic uncertainty overall, and any big changes could certainly have negative impacts on the online ad industry
Making creators more money in 2023
While ad demand may be down in 2023, that’s only part of the picture for your revenue. We have so many exciting new ways we’re supporting creators this year that can offset lower advertiser spend and even drive better revenue for your business compared to last year.
The best brands want to spend money here
Ad budgets are limited, and the best brands are picky about where they spend them. The good news? Our creators are as big as some of the world’s largest media companies and platforms, placing us firmly in Comscore’s top ten digital media properties (#7 as of December 2022!) — the industry’s gauge of the largest and best ad audience.
Coming soon: Some really big news about our ad sales team and how we connect creators to the best brands’ ad spend.
Top-of-the-line technology and ad code drive higher RPMs
Like Evan, our Chief Product Officer, explains here, we’re obsessed with optimizing our ad code to squeeze out every possible potential fraction of a cent for our creators.
Every day, we run continuous experiments to see how effective each improvement is as a pure measure of the code’s ability to deliver value, isolated from the macro trends of the industry and all other factors.
Despite lower advertiser spending, creator RPMs are up 15% from where they otherwise would be, proving that investing in our tech pays off for our creators. We’re not slowing down anytime soon!
We’re expanding the ways we help creators grow
Large companies have extensive teams and resources to grow their audiences, develop new revenue streams, and operate their businesses — how do smaller, independent creators compete?
In 2023, we’re fundamentally transforming how we help creators reach the next level with more support and resources to grow thriving businesses.
We’re helping creators:
- Grow traffic and succeed at SEO because more pageviews = more money
- Create long-term loyal audiences through email strategies and online communities
- Explore new revenue streams, like affiliate commerce content
- Build first-party data to prepare for a future without third-party cookies
- Uniquely grow their businesses in the ways that work for them
Uncertainty may be the only certainty, but we’re riding the wave of all the latest innovations, insights, and info so you can stay focused and confident. We’re doubling down on ways to help creators succeed, so buckle in and come along for the ride!